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Friday, September 19, 2014

Weekly: BABA IPO, hedge fund divestment

In
the news this week is the IPO of Alibaba at $68. BABA rocketed to
over $90 on the first day of trading. Yahoo, which owns 22%, dipped
slightly. Also in the news California pension funds decide to stop
investing in hedge funds. North Carolina is considering a similar
move. There are over 10,000 hedge funds today, over 1,000 just for emerging market securities.

Funds charging their clients 2 and
20 (2% of assets and 20% of profits) find it difficult to perform
net of fees. The nearly straight up bull market (over 1000 days
without a 10% correction) means low cost stock index funds have been
the big winners for this cycle.

My
trading week was so-so. I'll post a monthly update in a day or two. I
cover more short calls for losses. I get pinched on MSFT on
expiration day. I open a new net long position in VRX, new long in
TTM. I take a loss in GLD. Here are the trades:

Fri
Sell AMGN Oct 130 puts @142.7. Rebalance Oct short strangles on
Amgen. AMGN continues to rally. I am short the Oct 125 puts and Oct
155 calls. I rebalance as the stock moves up by selling another layer
of puts.

Cover
short SWK Sep 95 calls @93.5. Stanley Toolworks gapped up in the
morning on analyst comments. I put in an order to close my short puts
and got filled as SWK whipped back down. The spreads are wide on
expiration day, so better to close the position, than having to sit
on pins and needles into the close. I have a similar situation in
Microsoft.

Sell
VRX strangles, I leg in: Sell Oct 95 puts @117.0, Sell VRX Oct
145 calls @117.4. New net long position in Valeant Pharma. VRX has
been a good trading stock for me all year. I skipped the September
option cycle.

Cover
short MSFT Sep 47 calls @47.4. Crunch, another loser. Looks like
shenanigans as open in interest is over 70,000 contracts at this
strike. I placed several limit orders, but Microsoft kept rallying. I
end doing a buy to close market order about five minutes before the
close of trading. Fortunately, the dollar loss is small, even if the
percentage loss is about 300% basis the premium collected. It has
been a while since I had to "dance with the devil" just
before expiration. I am not a nimble trader so I don't enjoy playing
it so close.

Thu
Cover short IWM Sep 102 puts @115.0. I free up some margin by
covering these Russell 2000 puts that were about to expire. Normally,
I would let them expire worthless, but am redlining on buying power.

Cover
short GLD Sep 118 puts @117.4. I cover for about a 180% loss, as gold
declined late on Wednesday after Fed news. The dollar rally related
to Scotland's independence referendum is the main reason given.
Scotland vote is later today, so there is a chance that this is the
short term low. There is also a chance that GLD accelerates to the
downside. With the option in the money, I move to the sidelines. When
in doubt get out.

Wed
Sell FDX Oct 150 puts @161.0. I open an October position in
Federal Express. FDX breaking out from a chart base on earnings news.
I am short September strangles.

Cover short BRKB Sep 140 calls
@140.0. I cover short calls on Berkshire Hathaway for a big
percentage loss (about 400% basis the tiny premium collected). This
is the second loss this option cycle selling BRKB calls.

Cover
short AMGN Sep 140 calls @140.9. Double ouch. I cover short calls on
Amgen for about a 300% loss basis the option premium collected. AMGN
has a squirrelly day. It was up strong in the morning, then dipped
into the red, and then ralied strong after the Fed news. Another big
loss. I believe this is the fifth big loser from maybe ten layers of
calls that I sold on the dip in early August. It has been a strong
five week rally. I have sold more puts to offset, but closing out
these calls two days before expiration is painful.

About Me

I now have two blogs, a piano blog
(link1)
and a stock market blog (link2).

Piano intro: I am a whistle and Irish flute player that started playing piano keyboard in March 2012. Mostly I compose and play my original tunes on my Casio PX-150 digital piano, which I bought in January 2013. I started in 2012 with a Yamaha NP11 keyboard.

Intro for trading blog: I am an individual investor posting a public trading diary. I am not here to give advice. I post my trades and thoughts for public consideration. Mostly it helps to keep myself straight. As of 2012, my favored trades are selling naked puts and strangles.